UPDATE 1-Morgan Stanley starts US refiners with in-line

Oct 15 (Reuters) - Morgan Stanley started coverage of U.S.
refiners with an "in-line" view, saying that drawing down of
distillate inventories due to cold weather, tightening of
excess capacity and economic recovery will combine to improve
crack spreads, but the recovery will be long and slow.

Crack spread - the measure of how much refiners net from
turning crude oil into fuels like gasoline - have remained
suppressed due to weak demand for refined products amid the
global downturn and increased capacity.

"We expect 2009 to mark the trough in US gross refining
margins, followed by a slow recovery extending into 2013," the
brokerage said.

The brokerage believes that refining stocks will trade
higher in the near term, despite likely challenging third- and
fourth-quarter results.

Morgan Stanley said "overweight"-rated Sunoco Inc (SUN.N: Cotización)
is its top pick as it expects the company to gain from greater
exposure to non-refining and shorter-cycle businesses.

Shares of Sunoco rose as much as 9 percent before paring
some gains to trade up $2.46 at $32.25 Thursday afternoon on
the New York Stock Exchange.

For alerts on the story double click [ID:nWNAB9536]
(Reporting by Krishna N. Das in Bangalore; Editing by Deepak
Kannan)